In the latest episode of the renowned tech podcast TBPN, Wall Street’s infamous celebrity @MartinShkreli provides an in-depth analysis of the collapse of the 25-year-old prodigy fund, Leopold: He believes that some actors deliberately targeted Situational Awareness—selling overlapping positions and shorting the fund’s holdings on Monday to actively accelerate its downfall. Martin Shkreli himself once single-handedly disrupted the U.S. pharmaceutical industry and Wall Street; he was convicted of manipulating pharmaceutical stock prices and sentenced to seven years in prison. He is, in essence, the “grandmaster” of leveraging, shorting, and博弈 with regulators. His insights and understanding of Wall Street’s jungle rules far surpass those of ordinary financial commentators. Here are his core perspectives: 1. Four-times leverage: A 25% drawdown can wipe you out entirely. According to market data, the fund used approximately $45 billion in book capital to support around $120 billion in total positions. At this level of exposure, a 25% decline in holdings could easily breach net asset value. Whether the fund’s investment thesis was ultimately correct became irrelevant—the priority was simply surviving until the next day. 2. Once Wall Street knows you must sell, they’ll make you sell cheaper. Once markets detect that a fund is forced to liquidate, other institutions preemptively sell stocks overlapping with its portfolio while simultaneously shorting its holdings. Shkreli calls this practice “shooting against the fund.” The more urgently the fund sells, the more aggressively others short; the more aggressively others short, the more the fund is forced to keep selling. 3. Prime brokers love your leverage—but won’t stand by you during drawdowns. Prime brokers profit from interest spreads on borrowed capital—the more clients borrow, the higher their revenue. But when margin buffers thin out, risk departments take direct control of positions. They’d rather lock in a $1 billion loss than gamble further and risk losing $5 billion. 4. Private equity gains mean nothing when margin calls hit—you can’t use them as cash. The fund held large positions in unlisted assets like Anthropic. While these may appear valuable on paper, there is no exchange and no instant “sell” button. When tens of billions in margin calls arise, private equity valuations cannot fill immediate cash shortfalls. Shkreli’s verdict: When hedge funds wear venture capital hats, it’s usually a “death kiss.” 5. Everyone blames war, oil prices, and open-source models—but what truly crushed the fund were marginal traders. Shkreli argues that in extreme market conditions, prices are determined not by fundamentals, but by the final 5% of traders actively buying or selling—and these traders often carry 3x to 4x leverage. The latest entrants with the heaviest positions are typically the first to be forced out. 6. Citadel loves showing up when others are forced to sell. Jane Street, Millennium, and Citadel are all said to have participated in bidding for the fund’s positions—ultimately, Citadel acquired a portion. Shkreli estimates that if these positions were absorbed smoothly, Citadel could immediately realize $3–4 billion in paper gains. Holding cash may seem conservative under normal conditions—but when others blow up, cash becomes bidding power. 7. High win rate doesn’t justify reckless position sizing. According to the Kelly Criterion, even with a 60% win rate on a single trade, betting far beyond the optimal position size will still lead to long-term ruin. Shkreli uses himself as an example: He once knew a fund manager who consistently kept 80–90% of capital in cash and never recorded a losing quarter for over 20 years. Meanwhile, his first move after securing capital was to go 8x leveraged. “The dumbest thing in the world.” 🤓 Shkreli’s final summary on the collapse: “Leopold didn’t do anything wrong—its leverage level predetermined the outcome. A whisper of volatility was enough to force its liquidation. There was no other possible ending.”